Permian Resources Q2 2025 Earnings Report

Permian Resources EPS Results

• Actual EPS: $0.27
• Consensus EPS: $0.27
• Beat/Miss: Met Expectations
• One Year Ago EPS: $0.39

Permian Resources Revenue Results

• Actual Revenue: $1.20 billion
• Expected Revenue: $1.23 billion
• Beat/Miss: Missed by -$31.86 million
• YoY Revenue Growth: -3.90%

Permian Resources Announcement Details

• Quarter: Q2 2025
• Date: 8/6/2025
• Time: After Market Closes
• Conference Call Date: Thursday, August 7, 2025
• Conference Call Time: 10:00AM ET

Permian Resources (NYSE:PR), an independent oil and natural gas company, focuses on the development of crude oil and related liquids-rich natural gas reserves in the United States. The company's assets primarily focus on the Delaware Basin, a sub-basin of the Permian Basin. Its properties consist of acreage blocks in West Texas, Eddy County, Lea County, and New Mexico. The company was formerly known as Centennial Resource Development, Inc. and changed its name to Permian Resources Corporation in September 2022. Permian Resources Corporation was incorporated in 2015 and is headquartered in Midland, Texas.

Permian Resources Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Full-year production guidance was raised by 3% while the capital budget was lowered by 2% following record drilling speeds and historic low completion costs.
• Positive Sentiment: Permian Resources closed the ~$600 million Apache acquisition at below mid-cycle prices, adding ~900 barrels of oil per day of production with significant operational overlap.
• Positive Sentiment: The company executed a $43 million share buyback in April at an average price of $10.52 per share, reflecting opportunistic use of cash during market volatility.
• Positive Sentiment: Permian Resources received its first investment grade rating from Fitch, with expectations that other agencies will follow, strengthening its financial flexibility.
• Positive Sentiment: New gas and crude transportation and marketing agreements are expected to boost netbacks by over $0.10 per Mcf and $0.50 per barrel, lifting 2026 free cash flow by $50 million.

Presentation

[Operator]

Good morning, and welcome to Permian Resources Conference Call to discuss its Second Quarter twenty twenty five Earnings. Today's call is being recorded. A replay of the call will be accessible until 08/21/2025, by dialing (888) 660-6264 and entering the replay access code 92721 or by visiting the company's website at www.permeanrest.com. At this time, I will turn the call over to Hays Mabry, Permian Resources' Vice President of Investor Relations, for some opening remarks. Please go ahead, sir.

[Hays Mabry, VP - IR at Permian Resources]

Thanks, John, and thank you all for joining us. On the call today are Will Hickey and James Walter, our chief executive officers, and Guy Olofen, our chief financial officer. I would like to note that many of the comments during this call are forward looking statements that involve risk and uncertainties that could affect our actual results or plans. Many of these risks are beyond our control and are discussed in more detail in the risk factors and the forward looking statement sections of our filings with the SEC. Although we believe the expectations expressed are based on reasonable assumptions, they are not guarantees of future performance, and actual results may differ materially.

[Hays Mabry, VP - IR at Permian Resources]

We may also refer to non GAAP financial measures. For any non GAAP measure we use, a reconciliation to the nearest corresponding GAAP measure can be found in our earnings release or presentation. With that, I will turn the call over to Will Hickey, Co CEO.

[Will Hickey, Director & Co-CEO at Permian Resources]

Thanks, Hays. We are excited to discuss our second quarter results this morning. The operations team delivered our eleventh consecutive quarter of solid operational execution in Q2 that included the fastest well drilled, the most drilled feet per day and the lowest completion cost per foot in company history. This execution combined with continued strong well results support us raising our full year production guidance while delivering a lower CapEx guidance than originally announced in February. Q2 was also a very volatile quarter that presented an opportunity for us to demonstrate our downturn playbook.

[Will Hickey, Director & Co-CEO at Permian Resources]

In April, we opportunistically executed our buyback program with repurchases of $43,000,000 of shares at an average price of $10.52 per share. And then in May, we signed the approximately $600,000,000 Apache acquisition at lower than mid cycle commodity prices. This acquisition is the exact type of deal we like to do with meaningful overlap with our existing assets, strong free cash flow and inventory that competes for capital immediately. We closed the acquisition approximately six weeks ago and are even more excited about our ability to optimize operations the acreage position. These type of countercyclical investments are exactly what we want to do to be able to deliver leading shareholder returns throughout the cycles.

[Will Hickey, Director & Co-CEO at Permian Resources]

And we've done so while maintaining leverage of approximately one times and liquidity of approximately 3,000,000,000. After executing on all aspects of our downturn playbook and taking advantage of recent market volatility, we are still in a prime position to pursue further investment opportunities to create long term shareholder value. Moving to Q2 reporting details, production exceeded expectations with oil production of 176,500 barrels of oil per day, which includes approximately 900 barrels of oil per day from the Apache acquisition, which is in line with our prior messaging. Total production for the quarter was 385,000 barrels of oil equivalent per day. Results were driven by strong well performance from both our base wells and recent POPs, which resulted in adjusted operating cash flow of $817,000,000 and adjusted free cash flow of $312,000,000 with $5.00 $5,000,000 of cash CapEx.

[Will Hickey, Director & Co-CEO at Permian Resources]

Additionally, our ground game machine continues to fire on all cylinders as we added 1,300 net acres across 130 different Grassroots acquisitions in Q2 to build additional interest ahead of near term development. These opportunities remain some of the highest returning investments in our portfolio and are a core piece of the PR story to maximize the value of our assets. With that, I'll turn it over to James.

[James Walter, Director & Co-CEO at Permian Resources]

Thanks, Will. Turning to Slide five. Our strong balance sheet is what gives us the confidence to prudently invest capital across all cycles in our business. This has been a key part of our business model for the last ten years and will remain a core part of our strategy going forward. One of our primary goals has always been to achieve investment grade status, and we are thrilled to announce that we have received our first investment grade rating from Fitch.

[James Walter, Director & Co-CEO at Permian Resources]

We are proud that Fitch recognized our strong credit metrics and track record of operating with a financial strategy consistent with an investment grade company and would expect the other rating agencies to reflect investment grade status in the near term. We are fortunate that the PR business generates tremendous free cash flow, which allowed us to execute a $600,000,000 bolt on and $45,000,000 share buybacks with cash on hand, all lined in Q2 with leverage at one times and $3,000,000,000 of liquidity. And we generate significant free cash flow going forward. The beauty of the PR business today is we don't have to choose between debt repayment, acquisitions, buybacks or building cash. We can execute on all of these as soon as opportunities present themselves.

[James Walter, Director & Co-CEO at Permian Resources]

This provides the ultimate flexibility to efficiently allocate capital and drive value for shareholders. Turning to Slide six, we want to spend some time discussing our Permian Resources as approaching the marketing of our hydrocarbons. With our rapid growth, we have historically focused our midstream and marketing efforts on flow assurance and low fees, and we've been extremely effective in ensuring all of our hydrocarbons can get to market with zero interruptions over the past ten years. But as our business has grown to the scale it is today, it has become apparent that our marketing strategy needs to evolve. Over the past twelve months, we have built out a full midstream and marketing team in Midland that has made great progress selling more hydrocarbons downstream in the Permian Basin and improving our netbacks.

[James Walter, Director & Co-CEO at Permian Resources]

We are fortunate to have had significant flexibility to change the sales point for a large percentage of our crude and gas volumes, and we are pleased to announce we have recently entered into multiple new transportation and marketing agreements to optimize PR's pricing. Slide seven goes into a little more detail on the impact of the recent downstream contracts we have executed. On the gas side, we have entered into multiple transportation and marketing agreements to sell a significant portion of residue natural gas to non Waha hubs on the Gulf Coast, Central Texas and East Texas. These agreements should provide an incremental 75,000,000 cubic feet a day of firm transport by year end 2025, which ramps to $450,000,000 a day by year end 2028. On the crude side, we have entered into multiple new crude oil purchase agreements providing improved netbacks, diversified pricing and increasing exposure to Gulf Coast markets.

[James Walter, Director & Co-CEO at Permian Resources]

We expect the net impact of these agreements to improve our gas netbacks by over $0.10 per Mcf and our crude netbacks by over $0.50 per barrel. The cumulative effect of all this effort by our team resulted in a $50,000,000 uplift to 2026 free cash flow versus 2024. We are excited about what we've done in the past twelve months on the marketing side and still retain significant flexibility for further optimization. Turning to Slide eight, we are excited to roll out a revised plan that incorporates our recent bolt on that closed in June. This plan reflects an increase to the original full year 2025 production guidance by 3%, while lowering the capital budget by 2%.

[James Walter, Director & Co-CEO at Permian Resources]

The only other major update to point out is the impact of the One Big Beautiful Bill Act. Overall, we view the recent bill as a strong step towards further unlocking potential of U. S. Shale. The tax provisions should further incentivize investment in domestic shale production and meaningfully reduce Permian Resources taxes over the coming years.

[James Walter, Director & Co-CEO at Permian Resources]

We expect current cash taxes to be less than $5,000,000 in 2025 and less than $50,000,000 cumulatively in 2026 and 2027. In addition, our industry will benefit from the reduction in red tape associated with federal drilling permits and federal lease sales, the reduction in complexity of commingling federal and state production and the further incentives for research and development. It is our belief that these tax and regulatory benefits far away the modest impact we expect tariffs to have on steel and other input costs. I'll be concluding today's prepared remarks on Slide nine where we reemphasize our value proposition for investors. We are proud of the hard work our team has put in and the strong returns that work has delivered for investors so far.

[James Walter, Director & Co-CEO at Permian Resources]

But I think it's important to point out that this peer leading total shareholder return has been driven by the growth in free cash flow per share rather than a rerating of our multiple. We believe our balance sheet, our industry leading cost structure and low breakevens position the company to succeed and create value for investors in any commodity price environment. Thank you for tuning in today and now I'll turn it back to the operator for Q and A.

[Operator]

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Thank you for waiting. We now have our first question. And this comes from Scott Hanold from RBC Capital Markets. Your line is now open.

[Scott Hanold, MD - Energy Research at RBC Capital Markets]

Thanks. Good morning. I wouldn't mind a little bit of color on your recent production performance. It looks like you've tilled, what, less than half your planned program And and two queues outperformance, and I guess relative to my model, was was pretty strong.

[Scott Hanold, MD - Energy Research at RBC Capital Markets]

I think there might have been some improved NGL yields in there. But can you can you just generally talk about, like, you know, maybe with the timing of tills or, know, the type of well you're drawing because performance did feel, you know, pretty robust this quarter?

[Will Hickey, Director & Co-CEO at Permian Resources]

Yeah. I mean, the the first half of the year has been we drilled some awesome wells. I think that, know, it's been a production comes from a combination of a lot of places. The the base the base production is the overwhelming majority of the barrels we produce every quarter. And, you know, we've been fortunate to have had a pretty mild summer, good weather, so, you know, really, really good downtime statistics.

[Will Hickey, Director & Co-CEO at Permian Resources]

And then well results continue to impress. You know, the Delaware Basin is kind of in the place to be and, you know, good rock outperforms more often than not. So, we've been in a fortunate position that we kind of keep keep hitting our numbers or beating the numbers quarter over quarter, and I think that's just a kind of representation of the good rock that we have.

[Scott Hanold, MD - Energy Research at RBC Capital Markets]

Okay. Thanks for that. And and as my follow-up, you know, when when you sort of look at the landscape right now, I mean, obviously, it feels a lot better than it did back in in the first quarter. But, as you look going forward in this relative outperformance, I guess this year, did step up your production guidance, obviously, related to the outperformance, but on a relative basis, unchanged CapEx. And how do you think about maybe letting some of that benefit accrue to the capital side versus the production side?

[Scott Hanold, MD - Energy Research at RBC Capital Markets]

And is it in part due to the commodity price outlook or is it more just what's most efficient operationally?

[James Walter, Director & Co-CEO at Permian Resources]

Yeah. I mean, I think for us, like, we we did take down standalone CapEx by $50,000,000 to kind of this quarter, as you can see in our updated guidance. So I think a little bit less activity. I think for us, it's really going to be a judgment call depending on what we view the macro environment looking like over time. Like, I definitely agree with you that the market and the downside risk feels a little better today, but I'd say there's still a tremendous amount of uncertainty with regards to commodity prices and what the overall economy does.

[James Walter, Director & Co-CEO at Permian Resources]

So I think for us, we're being patient, we're in wait and see mode. Like Will said, if you have a little bit of outperformance in Q2, that's going to show itself, I think, very modestly in in our production numbers. But, going forward, I think it's gonna be a really a judgment call, and and we're gonna react to what we feel like is the best real time information we have and and make a call as we get there.

[Will Hickey, Director & Co-CEO at Permian Resources]

But it'll be more commodity price returns driven than efficiencies of operations. Our I I say within reason, I have all the comments in world that our team can add activity, drop activity without missing a beat. They they've shown it in the past. So we are. There's value in, you know, keeping the same crews and the same rigs out there, but it's not something that we're scared to do if it makes sense.

[Scott Hanold, MD - Energy Research at RBC Capital Markets]

Okay. Thanks for that. Thanks.

[Operator]

Thank you. And the next question comes from John Freeman from Raymond James. Your line is now open. Please go ahead.

[John Freeman, Managing Director at Raymond James Financial]

Thank you. Good morning. Really like the steps that, that were taken with these marketing agreements, that y'all outlined on on on slide seven. Any help y'all can provide on just sort of how to think about the impact of, to to GP and T sort of unit costs the next couple of years in in light of these agreements?

[Guy Oliphint, EVP & CFO at Permian Resources]

Yep. Right now, there won't be a change to GP and T, based on those agreements. We have some flexibility to do diff different things with gas over time that could change that, but we we talked about that then. So right now, I don't need to adjust GP and T.

[John Freeman, Managing Director at Raymond James Financial]

And what we've shown on

[James Walter, Director & Co-CEO at Permian Resources]

slide seven, the the 10¢ per MCF and the 50¢ per barrel, that's that's net of all expected implied costs.

[John Freeman, Managing Director at Raymond James Financial]

Okay. That's good to know. And then on the same topic, I mean, y'all highlighted that, you know, you've sort of the the midstream strategy is is sort of evolved over time as y'all become, you know, one of the largest, you know, both oil and gas producers in the Permian. You talked about kinda doubling the size of the midstream and the marketing team. And, you know, we've we've recently seen some of the the the large E and Ps start moving more, towards kind of stepping up or expanding their kind of midstream presence, taking ownership of midstream assets.

[John Freeman, Managing Director at Raymond James Financial]

Just as y'all think about just given your size, the evolution of the company, is that some is that a direction that y'all may head eventually?

[James Walter, Director & Co-CEO at Permian Resources]

Yeah. I think we've we definitely evaluated options like that as part of the the deals we've announced in this QT release and some other ones that we've been working on. Think our view on that by and large has been the same with regards to midstream and kind of large scale infrastructure projects is that those really don't compete with the returns of our upstream business and that's by a wide margin. I think we're seeing such attractive rates of returns at the wellhead that we think it's more prudent as capital allocators to focus our efforts on doing what we do best, is drilling and completing wells and making oil. I think those projects are good.

[James Walter, Director & Co-CEO at Permian Resources]

I think probably better fit for more infrastructure like capital for us, and we're able to get all of the benefits other than the equity investment kind of from the types of deals that we've done. And and I think that's probably the right base case going forward.

[John Freeman, Managing Director at Raymond James Financial]

Great. Appreciate it, guys.

[James Walter, Director & Co-CEO at Permian Resources]

Thanks, John.

[Operator]

Thank you. And the next question comes from Neil Mehta from Goldman Sachs. Your line is now open.

[Neil Mehta, Head - Americas Natural Resources Equity Research at Goldman Sachs]

Yes. Good morning, Will, James and team. I just would love you to unpack a little bit more about your downturn playbook, which you alluded to in your remarks and in the release. Just, for for those of us on the line, talk about what your downturn strategy is to make sure that if we are going to appear to softer commodity, how do you ensure that you you come out of it stronger?

[James Walter, Director & Co-CEO at Permian Resources]

Yeah. I mean, I think the kind of the kind of most important part of that is having a high quality business and a strong balance sheet. You know, think the the quality of our business shows itself on our leading low breakevens in the Permian and a balance sheet that's, been in a tip top position of strength for really as long as we've been running this business. So I think if you're going to go through a downturn, it starts with asset quality and balance sheet. And then I think that's probably the anti.

[James Walter, Director & Co-CEO at Permian Resources]

And then beyond that, you know, think we've actually proven over time that we really think the best opportunities for investing in E and P could be periods of kind of market panic and dislocation. And like Will said, that can show itself in a lot of ways. And we did a lot of this, albeit on a somewhat smaller scale in Q2, is buying high quality assets at lower than mid cycle prices. It's buying back shares when you believe the pricing is truly dislocated. And I think it's all it's doing all of that while making sure your balance sheet is strong throughout kind of from peak to trough.

[James Walter, Director & Co-CEO at Permian Resources]

So I think for us you know, that's something we've been talking about for the last couple of years, and we're actually excited about the opportunity to, you know, do some of those strategies and execute those pretty well in q two. Although it's probably a shorter period of dislocation than a lot of the ones we've seen, you know, that things could turn again at some point in the future and and we'll always be ready.

[Neil Mehta, Head - Americas Natural Resources Equity Research at Goldman Sachs]

And then the the follow-up is is just, there's been a lot of talk about M and A in some of the larger cap conference calls. And just your perspective, certainly, guys have been a great consolidator of assets opportunistically with really smart bolt ons and transformative M and A as well. But your perspective on whether you see PR as a consolidator or potentially a seller over time? Recognizing it's a tricky question, but it's, I think, an important one.

[James Walter, Director & Co-CEO at Permian Resources]

No. That's that's a fair question and a good one. I mean, I think given our leading cost structure, we've always said we view Permian Resources as the logical consolidator of Delaware Basin assets today. And frankly, we're really excited about that opportunity set and what's in front of us. We talked about our ground game efforts remain strong.

[James Walter, Director & Co-CEO at Permian Resources]

We've continued to find larger scale acquisitions like the Berea Draw acquisition last year, the Apache bolt on earlier this year and several $100,000,000 deals kind of in between. But we're I think we're confident too that that pipeline remains robust and we'll be able to find those types of attractive acquisitions that make our business better. So I think, you know, we're not a perfect crystal ball, but I'd say really excited about what the opportunity set looks like as a consolidator in the Delaware. But to the flip side of your question, I'd say we really do believe that our business has a tremendous amount of go forward potential on a standalone basis. I think we believe that we continue to execute at the levels we're executing on today that we can continue to grow free cash flow per share like we've done since inception.

[James Walter, Director & Co-CEO at Permian Resources]

And as a result of that drive significant outperformance kind of versus the broader market and peers on a total shareholder return basis like we've in past and frankly like you can see on Slide nine. But look, our goal has always been to do what we believe creates the most long term value for shareholders, whether that be acquiring assets or divesting them, buying businesses ultimately selling our business. And we've made every decision we've ever made running this business as shareholders. And together our team owns over 6% of the outstanding equity of Permian Resources stock. And as such, I think investors can rest assured, we're going to continue to be super aligned with the entire investor base and do whatever we think will make the highest long term returns and create the most value for investors, whichever path that may be.

[James Walter, Director & Co-CEO at Permian Resources]

So I think really fortunate to be in the position of kind of purpose aligned with investors and got to be focused on doing what makes the most sense over the long term.

[Neil Mehta, Head - Americas Natural Resources Equity Research at Goldman Sachs]

Yes. Really good answer. Thank you so much.

[Operator]

Thank you. And the next question comes from Kevin McCarthy from Pickering Energy Partners. Your line is now open.

[Kevin MacCurdy, Managing Director at Pickering Energy Partners]

Hey, good morning. The market may be a little spoiled as we usually get an update on lower well costs from you guys. I realize maybe there's some moving pieces with the tariffs, but your quarterly CapEx was very good and you started off the call mentioning record drilling times. Any thoughts on the magnitude of efficiency or drilling improvements you still see down the pipeline?

[Will Hickey, Director & Co-CEO at Permian Resources]

Look, I think we proved to ourselves this quarter that the, you know, the the best wells can be better than we've seen in the past. And I didn't even mention it, but we another stat that was cool as quarter is is we drilled five of our fastest 10 wells ever in q two. So we're starting to really push the envelope of the best wells. You know, we need to keep making progress on the average wells and on the worst wells. But on the drilling side, you know, time directly correlates to the bottom line.

[Will Hickey, Director & Co-CEO at Permian Resources]

You save about a $100,000 every day you can cut. And so I think we've proven to ourselves there's a lot of stuff we can go get, and we we've done it now on a handful wells. We just gotta go do it on the average. And, yeah, you're right. Like, q two, our our well cost on a per foot basis is probably flattish to q one.

[Will Hickey, Director & Co-CEO at Permian Resources]

I think some of that's we drill a little bit shorter lateral lengths. You don't get quite the efficiencies just the way the schedule shook out. But if you look at the kind of what we've done on the frac side and the progress we've made on the kind of top quartile of drilling side, I think there's lot of tailwinds into the back half of the year.

[Kevin MacCurdy, Managing Director at Pickering Energy Partners]

Great. Sounds like there's still some improvement to come. And as a follow-up, any change to how you're seeing the the cadence of turner lines this year? And how much of your program do you have left to execute in the back half of the year? Thanks.

[Will Hickey, Director & Co-CEO at Permian Resources]

It's it's the same it's the same numbers we've put out there. You know, the $2.75 net of the 10 that we dropped from the original budget. I think we're slightly back half weighted, but it it's the same as we last time we talked to y'all.

[Hays Mabry, VP - IR at Permian Resources]

Great. Thanks, Kevin.

[Operator]

Thank you. And the next question comes from Philip Chungwerk from BMO. Your line is now open. Please go ahead.

[Phillip Jungwirth, Managing Director at BMO Capital Markets]

Permian gas marketing, there's a number of projects in development to take gas to the Gulf Coast, but we're also seeing proposed projects to move volumes to the Rockies and even based on yesterday's news, the West Coast. So while it's early on those options, just wondering how much you're considering these other outlets as a way to maximize netbacks? And ultimately, how much Waha exposure would you look to maintain given there should be some tightening in the differential after 2026?

[James Walter, Director & Co-CEO at Permian Resources]

Yes. I mean, I think the shortage is we're excited about all these projects. I think we've been firm believers for a long time that we need more pipes out of the basin sooner. I think we're pretty excited about just the broader backdrop and I'd say the willingness of pipeliners to to get out ahead of the kind of growth in gas we see and expect to continue to see in the Permian. So we think this is a great thing for Permian resources, a great thing for the Permian Basin, I think it'll also be a great thing for the owners of these pipelines.

[James Walter, Director & Co-CEO at Permian Resources]

We're not kinda as as you saw in our in my notes, like, we're not just set on going to the Gulf Coast on the gas side. I think we're open and excited to explore different markets. I think for us, we're really just trying to solve what we think is going to bring the best net back for every molecule of gas that we make. So I think we'll be constantly evaluating kind of each and every one of these. I'd say in terms of how much Waha do we want long term, I think historically we said we used to sell about 20% to 25% of our gas outside of the basin and 75% to 80% in basin and we'd like to reverse that over time.

[James Walter, Director & Co-CEO at Permian Resources]

So I think the right kind of long term answer for PR is probably 20% to 25% of our gas sales at Waha, something like that. I think we like that flexibility and kind of having the options continue to sell gas in the basin over the long term because there's just a lot of interesting things that can happen and potentially some exciting developments. But I'd say that we kind of go from twenty-eighty to eighty-twenty over time.

[Phillip Jungwirth, Managing Director at BMO Capital Markets]

Okay. And then congrats on the Fitch upgrade. It sounds like the others are going to follow here shortly. But besides the lower cost of capital, sticking with the marketing angle here, just how how the IG rating at all three agencies kind of benefit you in terms of these opportunities, and and could it open up any potential deals that would otherwise not be available?

[Guy Oliphint, EVP & CFO at Permian Resources]

Yeah. I think investment grade I think I thought modestly helpful relative to these agreements, like, we've entered into really attractive agreements with the ratings that we have. So so, like, all these things, whether it's incrementally better terms on the midstream agreements, whether it's more flexibility to do longer term debt, or whether it's more availability of credit through the cycle, those are all positives for us from a balance sheet perspective. And I'd say we're glad Fitch recognized kind of the fact that our financial metrics and financial strategies are consistent with or superior to a lot of our IG peers, and we're focused on getting the rest of the way there.

[Phillip Jungwirth, Managing Director at BMO Capital Markets]

Great. Thanks.

[Operator]

Thank you. And, the next question comes from Zach Faram from JPMorgan. Your line is now open. Please go ahead.

[Zach Parham, Executive Director at JP Morgan Chase & Co]

Thanks for taking my questions. I wanted to follow-up on on the marketing deals. We've seen a couple of your peers sign some power deals in the basin linked to power pricing. Is that something you've had any negotiations on or that you're considering doing?

[James Walter, Director & Co-CEO at Permian Resources]

Yeah. We've looked at all of them. I think that's something we've actually spent a lot of time on over the past kind of twelve or eighteen months. You know, I think we haven't seen any in basin gas sales deals that we think we have confidence that can improve our netback relative to the other opportunities. And we haven't seen anything interesting on the power side kind of in the areas where I think we need the power the most.

[James Walter, Director & Co-CEO at Permian Resources]

I think most of what we've seen on the power side has been in Texas where we have really good grid connectivity and frankly really good kind of outcome pricing going forward. I think the area where we've needed more power connectivity has continued to be in New Mexico and we haven't seen a lot of projects there to date, but are are certainly open to them in Texas, New Mexico, wherever they come and we'll continue to evaluate them as they come across our desk.

[Zach Parham, Executive Director at JP Morgan Chase & Co]

Thanks. And then my follow-up is just on your hedge book. You added a little bit during the quarter. Can you just update us on how you're thinking about hedging on a go forward basis?

[Guy Oliphint, EVP & CFO at Permian Resources]

Yeah. No change on kind of overall hedge strategy, which is roughly 30%, 20%, 10% hedged. One, two, and three years out, we're there on '25. I have good progress on '26. I I think what you've seen from us is, like, we're flexible on how we get there.

[Guy Oliphint, EVP & CFO at Permian Resources]

We're not gonna force ourselves into those equations, but we try to be nimble and lean in when, yeah, what seems like pretty clear dislocations like we saw in June.

[James Walter, Director & Co-CEO at Permian Resources]

With our balance sheet where it is today, we're fortunate we can, like I said, be really patient. Like, you know, I think we're we're gonna try to hedge more if we think prices are higher, and and we could be comfortable hedging less if if there's fewer opportunities to lock in what we view as attractive prices. So I I think we're we're building flexibility as the quality of our business grows. And, you know, I think being opportunistic in late June and locking in kind of prices during that period of positive volatility was a great opportunity for us.

[Zach Parham, Executive Director at JP Morgan Chase & Co]

Makes sense. Thanks, James. Thanks, Scott.

[Operator]

Thank you. And the next question comes from John Abbott from Wolfe Research. Your line is now open. Please go ahead.

[John Abbott, E&P Research Vice President at Wolfe Research, LLC]

Hey. Thank you very much for taking our questions. I want to go back to Slide seven in the marketing agreements. I appreciate the free cash flow guidance on 2026, but the kind it looks like the amount of the capacity increased out to 2028. So I guess just to help us sort of triangulate things, as you sort of look out to 2028 and you look at sort of strip pricing, how would you describe the potential impact to free cash flow beyond 2026 from these agreements?

[James Walter, Director & Co-CEO at Permian Resources]

Yes. I mean, think for us, I'd say there's a lot of movement in kind of different markets in strip pricing all the way out to 2028. So I think our the answer we're comfortable giving is the existing contracts we expect to see kind of greater benefit than what's outlined in 2026. And I think we're continuing to find new opportunities to optimize. If you look at those charts in the middle of Slide seven, like we're kind of two thirds contracted on the gas side using current volumes and about half contracted on the crude side.

[James Walter, Director & Co-CEO at Permian Resources]

So I think for us kind of combination of the existing contracts that are shown on Slide seven and kind of future optimization we expect to do, I think you should expect to see that number go up as we get beyond 2026.

[John Abbott, E&P Research Vice President at Wolfe Research, LLC]

Appreciate it. And then just following up, you did close on the Delaware acquisition during the quarter. I mean, assets are in half in house. Could you maybe speak to a little bit more about the opportunities in terms of savings and optimization now that you have the assets in hand?

[Will Hickey, Director & Co-CEO at Permian Resources]

Yes. We closed six weeks ago, kinda took over operations shortly thereafter. I'd say this is right in our backyard. So this is, you know, from an integration perspective, I'd say it was kinda integrated within a week. There's some quick wins on the production side, just kind of obvious, you know, shared of people.

[Will Hickey, Director & Co-CEO at Permian Resources]

Like, we didn't we don't need near as many people because we already have pumpers, like, in the exact area. I think, ultimately, there'll be some wins on the water disposal side or water recycling side just given the kind of connectivity of the assets. I think that what's unique to this deal in particular is what our land team will do with the assets. If you think about kind of when we rolled that deal out, it was very unique and that it came with a lot of really good operated units and a lot of non op under PR, but it also had some kind of really good high quality, more scattered acreage that our team will go to work on right away. And we are, you know, we are in the middle of discussing multiple trades right now that kinda get us into either core up in areas where, you know, we'd like to core up or or get us into new units that we otherwise wouldn't be in.

[Will Hickey, Director & Co-CEO at Permian Resources]

So not a lot of, like, super specifics, and I I don't have a look back on the numbers yet because we're, you know, four weeks in from from operating or something like that. But we've had some quick wins on the people and water disposal side, and I'm expecting some big wins to come on the land side.

[John Abbott, E&P Research Vice President at Wolfe Research, LLC]

Appreciate it. Thank you very much for taking our questions.

[Will Hickey, Director & Co-CEO at Permian Resources]

Thank you.

[Operator]

Thank you. And the next question comes from John Ennis from Texas Capital. Your line is now open. Please go ahead.

[John Annis, Vice President at Texas Capital]

Hey, good morning all and thanks for taking my questions. For my first one, I assume the margin for error is extremely narrow to drill top decile wells, let alone five of 10 fastest in one quarter. Can you remind us of what has to go right to be able to do this? What and what did you do to have to go right five times in one quarter? And then just how far the average is to these high watermarks?

[Will Hickey, Director & Co-CEO at Permian Resources]

Yeah. So to to drill a top desk how well, you've gotta have no unplanned trips. You have to basically have no MPT or or or near zero MPT. And then we need to be rotating when we're drilling most of the time, you know. So basically, no sliding, no MPT, and and no unplanned trips.

[Will Hickey, Director & Co-CEO at Permian Resources]

I I think you're right. For all three of those to go well, it it's an outlier. That's not the average. But but we are I'd say those best wells are probably I mean, the two that we drilled this quarter recall, you know, five and a half and six days, something like that. And our average is probably closer to 10 and a half or 11.

[Will Hickey, Director & Co-CEO at Permian Resources]

So not quite half of the average, but but close to it. And so I look, for us, I think this is super exciting. Like, our our drilling team has not just one well, but a, you know, a handful or almost two handfuls of wells that have shown this is doable, and now they just gotta go see if they can make that the norm. And and if we do, it's it's it's very meaningful. You know, five or six days, call it 5 or 600,000 on a gross basis per well, like, that's, you know, coming up on almost 10% of our well cost we could cut out.

[Will Hickey, Director & Co-CEO at Permian Resources]

I don't think that's something y'all should expect to happen in second half this year, but I do think that is a a long term goal for us to try to go get.

[John Annis, Vice President at Texas Capital]

Terrific. For my follow-up, in in the release, you highlight chemical and power optimization projects as drivers of maintaining low LOE during the quarter. Can you provide some more color around those drivers and more specifically what you are doing on the power side?

[Will Hickey, Director & Co-CEO at Permian Resources]

Yeah. Look. Our our production team is always working hard to try to both increase run time and cut cost. And that's a balance because as you increase run time, it typically comes with more capital to get there. One projects or we've done two of these, we call micro grids, which is basically kind of behind the meter power where we'll set kind of larger scale power generation behind the meter and interconnected to a bunch of different locations.

[Will Hickey, Director & Co-CEO at Permian Resources]

It has a bunch of benefits. One, you know, field hands who are who are out servicing that equipment or spend less time driving to multiple locations. They just go to one spot. There's also some kind of economies of scale in larger scaled power generation and better run time. So that that's been a kind of the kind of wins we look for where you get both better run time and lower cost.

[Will Hickey, Director & Co-CEO at Permian Resources]

We've done two of those today. They both been extremely successful. I think power costs are down 30% on both of them. We're kind of working through now how many of these opportunities do we have. You know, as you can imagine, if you're if you have a high concentration of wells in in one area, it makes a lot of sense because the capital for the power lines is less.

[Will Hickey, Director & Co-CEO at Permian Resources]

And if the wells are more spread out, it starts to get skinnier on kind of your all in return on investment. So I think it's just other creative ways that we are always trying to get better. The production team takes a lot of pride in what they do, and and and this quarter, they they really demonstrated with some cool projects.

[John Annis, Vice President at Texas Capital]

Great color. Thanks, guys.

[James Walter, Director & Co-CEO at Permian Resources]

Thank you.

[Operator]

Thank you. And the next question comes from Leo Mariani from Roth Capital. Your line is now open. Please go ahead.

[Leo Mariani, MD & Senior Research Analyst at Roth Capital Partners, LLC]

Hi. Just wanted to clarify some of your commentary on well costs. If I heard you guys right, second quarter was kind of flattish dollar per foot. It sounds like shorter laterals sort of drove that. But if I heard you right, it sounds like the expectation is that those well costs will come down in the second half of the year.

[Leo Mariani, MD & Senior Research Analyst at Roth Capital Partners, LLC]

I just wanted to clarify that. And then additionally, you talk about how much of that you think can be driven by kind of sticky efficiencies? And is there a cost component as well that you may benefit from?

[Will Hickey, Director & Co-CEO at Permian Resources]

Yeah. Look, think the three things that we have in the back half of the year is my expectation are you're gonna see an efficiency step up. We've we've demonstrated the ability to do it, and I have no reason to believe that we can't replicate what we did in q two the back half of the year. With the volatility we've seen and kind of depressed oil prices, I'd say service costs in general are coming down a little bit. It's not you know, there wasn't a ton of room to give, but where we've had it, we've gotten some.

[Will Hickey, Director & Co-CEO at Permian Resources]

And we've made some, you know, vendor changes and are always trying to figure out kind of the best way to optimize kind of the balance of efficiencies and and cost per unit on our side. And And then there's a little offset in casing costs. Obviously, casing costs are up just due to tariffs. And I'd say you give a little bit back there. But yes, net net, I'd expect cost per foot to be down in the back half of the year.

[Leo Mariani, MD & Senior Research Analyst at Roth Capital Partners, LLC]

Okay. Appreciate that. And I guess just from a high level perspective, obviously, you talked about kind of the macro. If I read you your tone right, it sounds like maybe there's a little bit of caution just given the current landscape. Should people generally expect you guys to try to kind of hold oil flattish for the foreseeable future in this kind of uncertain macro landscape and just kind of remain laser focused on reducing costs?

[James Walter, Director & Co-CEO at Permian Resources]

Yes. I think that's probably a good generalization. I'd say we've kind of come out of several years of very pronounced growth and have said time and again this year that it does not feel like it's the right kind of market to return to what's been, if you combine organic and inorganic, you know, years of double digit production growth. You know, I think just with the amount of uncertainty and the supply side and the demand side we've seen today, we don't think that makes sense. So I think that they're kind of forecast for the near term and that could be, you know, months or that could be quarters until we kind of have more more confidence in in returning to growth.

[James Walter, Director & Co-CEO at Permian Resources]

I think kind of kind of flattish to to kind of low single digit growth is the right expectation, and that's what this year's looked like.

[Leo Mariani, MD & Senior Research Analyst at Roth Capital Partners, LLC]

Okay. Thanks.

[Operator]

Thank you. And the next question comes from Noah Hungness from Bank of America. Your line is now open. Please go ahead.

[Noah Hungness, Equity Research Associate at Bank of America Merrill Lynch]

Good morning, Will, James and team. To start off, I was hoping if you guys could expand on the comments around federal lands and the commingling that's kind of been opened up. What what does that mean for Permian Resources? Does that kind of allow you to access what was potentially stranded acreage or extended PSUs?

[Will Hickey, Director & Co-CEO at Permian Resources]

No.

[Will Hickey, Director & Co-CEO at Permian Resources]

It doesn't do that. It's it's really what it does is it allows us to build kind of central tank batteries in New Mexico like we used like like we currently do in Texas. Like, think if you've got two units that back up to each other and one had state and one had federal acreage. Prior to that, we would have to build basically completely separate batteries, which is for us to waste the capital and I think generally just not the most efficient way to to run our business. And and with the new, ability to commingle in New Mexico, we can build one battery and just meter the wells like we do in Texas.

[Will Hickey, Director & Co-CEO at Permian Resources]

So a little bit of capital savings. Really, I just say the world's a better place, you know, smaller footprint, less places to drive to, and a little bit of capital savings. So we're we're excited about it. I think it's a a really common sense thing that needed to happen for a long time, and we're happy that it finally got done.

[Noah Hungness, Equity Research Associate at Bank of America Merrill Lynch]

That makes sense. And then on the updated guidance, capital increased by the 20,000,000 that I think you guys had previously flagged. But the till count, working interest, and lateral footage was unchanged. So is the increase in the CapEx from, is it from just, moving capital into, higher cost part of the Delaware, Or is it, or is is there other spending involved there?

[Will Hickey, Director & Co-CEO at Permian Resources]

No. The the the the increased 20,000,000 was just there was there was eight wells that were work in progress wells that we took over from Apache that, you know, a little bit of capital flowed through to us kinda between effective date and closing or or or just post closing.

[Noah Hungness, Equity Research Associate at Bank of America Merrill Lynch]

Gotcha. Makes sense. Thanks, guys.

[Operator]

Thank you. And the next question comes from Paul Diamond from Citi. Your line is now open. Please go ahead.

[Paul Diamond, Equity Research Analyst at Citigroup]

Thank you. Good morning all. Thanks for taking the call. Just wanted to quickly touch on the balance sheet. You're all sitting at about $450,000,000 in cash.

[Paul Diamond, Equity Research Analyst at Citigroup]

And our number is that accretes pretty solidly over the course of the second half of the year. Can you remind us what you think is the right number to carry there? Or is there a plus or minus? Or what's the right number you wanna hold on the balance sheet?

[Guy Oliphint, EVP & CFO at Permian Resources]

Yeah. This is Guy. I think right number 500 to a billion. I think we've seen and kind of demonstrated the benefit of having, you know, this liquidity. I think we we talked about last quarter.

[Guy Oliphint, EVP & CFO at Permian Resources]

We went into q two with the best balance sheet we've ever had. We executed on the downturn playbook as we described, and we sit here with half a billion dollars of of cash on the balance sheet and one times leverage. So I think kind of our approach to the balance sheet and to just make making sure we have firepower for when we go into these downturns is a huge part of how we think we can deliver shareholder return over time.

[Paul Diamond, Equity Research Analyst at Citigroup]

Got it. Makes sense. And then just one quick follow-up on the ground game cadence. You guys have done a pretty good job over the first half of the year. Should we accept those or expect those numbers to remain relatively stable, 1,000 plus acreage per quarter?

[Paul Diamond, Equity Research Analyst at Citigroup]

Or is there any reason to think the opportunity set is growing or shrinking?

[James Walter, Director & Co-CEO at Permian Resources]

Yeah. I mean, I think it's definitely lumpy. I'd say we we feel awesome, like I said in my opening remarks, about our ground game pipeline. I think that recent Apache New Mexico acquisition really helps open up some kind of new new fairways and new windows to pursue that. So I think probably more I'd expect more ground game from here.

[James Walter, Director & Co-CEO at Permian Resources]

I think q two is probably a little bit wider than it would have otherwise been with all the volatility. You know, I just think kinda with what happened at the beginning of the quarter from an oil price perspective, it just takes a little time for both seller and buyer expectations to reset. So I think, you know, all in, I'd say we'd expect to do more ground game on on the back half from here.

[Paul Diamond, Equity Research Analyst at Citigroup]

Understood. Appreciate the clarity. I'll get there.

[Operator]

Thank you. And we have no further questions that came through at this time. I'll now hand the call over back to Will Hickey for closing remarks. Please go ahead, sir.

[Will Hickey, Director & Co-CEO at Permian Resources]

Thanks, John. This was an outstanding quarter for the PR team. Not only did we continue our operational track record in the field, but also quickly executed on our downturn playbook, which we believe will drive real value for shareholders. Given our high quality asset base and fortress balance sheet, we believe we can continue this execution and value creation going forward in any commodity price environment. Thanks to everyone for joining the call today and following the Permian Resources story.

[Operator]

Thank you. This concludes our conference call for today. Thank you all for participating. You may now disconnect.

Participants

Executives

• Hays Mabry, VP - IR
• Will Hickey, Director & Co-CEO
• James Walter, Director & Co-CEO

Analysts

• Scott Hanold, MD - Energy Research at RBC Capital Markets
• John Freeman, Managing Director at Raymond James Financial
• Guy Oliphint, EVP & CFO at Permian Resources
• Neil Mehta, Head - Americas Natural Resources Equity Research at Goldman Sachs
• Kevin MacCurdy, Managing Director at Pickering Energy Partners
• Phillip Jungwirth, Managing Director at BMO Capital Markets
• Zach Parham, Executive Director at JP Morgan Chase & Co
• John Abbott, E&P Research Vice President at Wolfe Research, LLC
• John Annis, Vice President at Texas Capital
• Leo Mariani, MD & Senior Research Analyst at Roth Capital Partners, LLC
• Noah Hungness, Equity Research Associate at Bank of America Merrill Lynch
• Paul Diamond, Equity Research Analyst at Citigroup